A City lawyer could be in line for record damages of up to £12m after a tribunal upheld a ruling today that she suffered sexual discrimination and harassment.

Gillian Switalski, 52, a mother-of-four, won a tribunal against F&C Asset Management last year after claiming the company's bullying caused her mental health problems. F&C said she had faked a nervous breakdown and asked for the ruling to be reassessed but the company lost its appeal , bringing Switalski a step closer to her multimillion pound claim for damage to her health and career.

The previous record for a sex discrimination case is believed to be £6.5m won by bond trader Allison Schieffelin against Morgan Stanley in 2005.

Switalski claims she was forced out of her £140,000-a-year job in September 2007 following 18 months of bullying and harassment. A tribunal heard her manager Marrack Tonkin criticised her for choosing flexible hours that gave her more time with her children, one of whom had cerebral palsy and another Asperger's syndrome. Tonkin was said to have become "fixated" with her working hours while a male colleague who had children with special needs was allowed to work from home to help care for them.

The tribunal was told Tonkin "had a particular difficulty" working with a senior woman older than himself and had been "dismissive" when Switalski complained that when her mother died the company demanded a death certificate so the cost of a cancelled business flight could be claimed on insurance. It was also alleged she was not allowed to join an all-male management committee despite her seniority and that while Tonkin took male colleagues out to lunch several times, she only shared a plate of sandwiches with him while he carried out a career review.

Speaking from her home in France, Switalski said that while she was delighted by the tribunal's decision, she also felt some trepidation because F&C did not accept any wrongdoing.

She said the case had seriously affected her health. "This has just had such a huge impact on me and my family and the shame I felt having to tell people I was mentally ill was appalling," she told the BBC. "I was subjected to scrutiny that you would expect a failing employee to be subject to, when I was an award-winning lawyer and I was making significant bonuses. I was being tracked like a bloodhound and since the case started every aspect of my personal life has been scrutinised."

Her solicitor, Howard Hymanson, said: "One should not underestimate the pressure that she and her family have had to endure in fighting to clear her name against her highly resourced and belligerent adversary intent upon pursuing every possible legal avenue of appeal in order to avoid paying compensation for the damage it has caused to her health and her career."

F&C claims new evidence showed that Switalski faked a nervous breakdown to secure a larger payoff. The tribunal was told that while she was claiming to be unfit for work, she accepted a better paid job at a rival firm. Switalski later turned down the job on health grounds.

F&C said it was disappointed by the decision and would study the written judgment before it decided its next steps. A hearing to award damages is due to take place on 5 January.